Replies to post #41210 on Zeev's Turnips Patch-No Politics (ZEEV)

[limtex]

Fed rate cut will more liekly strengthen the $. Boosting the other major world economies.

[CoalTrain]

John Maudlin makes an intersting point. Namely that the real reason the Fed will cut rates again is to weaken the dollar. If that is the case, then gold stocks may not have much of a pullback before surging MUCH higher.


George: The Saville links put me in your Grizzly camp if I was not already Grizzly before. Savilles comments about the market and gold make sense. What he says about European monetary union are things I have said about European union from day one. On the big picture I think Saville has got a picture that is a good bet.

However this being an Election week I am expecting some kind of unexpected turn this week or next. I keep trying to think of different things that could catch everybody by surprise. Voting problems were the first thing I thought of but then I finally wondered what would happen if the FED raised interest rates? I don't think anyone is expecting that. Zeev is the only one I have heard mention that. I agree with Zeev that probably the best thing that the FED could do is raise interest rates. People might buy because the FED has shown some real confidence in the market. Not that it would do much in the long run. I am more inclined to think that the Fed holds steady or cuts and that Mauldin is right they are ready to end the strong dollar policy. ONly real reason I am thinking about a raise is its an election week and no one is expecting a raise.

If the FED cuts Gold stocks go up with the market.
If the FED does'nt cut Gold stocks go up market goes down.
If the FED raises the market goes WTF??? and the Boyz

can run in any direction they want. Most likely up and for longer than if the FED cut rates because people will use it as another piece of evidence that the bear is finally over. What would happen to gold and gold stocks in this scenario?

Just an idea, maybe I am full O beans. I am no expert on the FED or interest rates.

CT

[Lane Hall-Witt]

George Cole--

That's an interesting view, but I don't think currency trading is guided, at the moment, by supply and demand. It seems that currencies are being bought and sold on prospects for economic growth, so I would actually expect a rate cut to strengthen the dollar, rather than weaken it -- unless forex traders interpret a rate cut as a sign that U.S. growth is failing and believe that the Fed action won't be able to save the economy. Market psychology right now is very different from the "rationality" assumed in our economics textbooks.